The correct simulation of fog and low stratus (FLS) is a difficult task for numerical weather prediction (NWP) models. The Swiss Plateau experiences many days with FLS in winter. Most NWP models employ terrain-following vertical coordinates. As a consequence, the typically flat cloud top is intersected by sloping coordinate surfaces above hilly terrain such as the Swiss Plateau. Horizontal advection across the sloping coordinate surfaces leads to spurious numerical diffusion which promotes erroneous FLS dissipation. To address this problem, we propose a new vertical coordinate formulation which features a local smoothing of the model levels. We demonstrate the positive impact of the new vertical coordinate formulation on a case study in detail and for a full month using the COSMO model. The improved vertical coordinate formulation is not yet sufficient to obtain perfect FLS forecasts, it is however a crucial aspect to consider on the way thereto.